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Is Making a Lasting Power of Attorney Safe For Your Financial Assets?

Posted: Friday, 3 November 2023 @ 10:43

Is Making A Lasting Power of Attorney Safe For Your Financial Assets?

If someone wants to take money out of an elderly person’s Estate, they can do it without too much difficulty in their capacity as an Attorney as it is much easier to get away with it using this method than say doing it after a loved one has died. (e.g as Executor)   

A number of years ago the retired senior judge Denzil Lush had warned that the public needs to be alerted to risks arising from a lack of safeguards in the power of attorney system. Former Court of Protection judge Denzil Lush said he would never sign a lasting power of attorney because it can have a ‘devastating effect’ on family relationships. Lush is fully qualified to give a view namely he was the author of the key legal guide to this area, and had judged in 6,000 power of attorney cases.

However, as we all know things can be a little more nuanced for Jo Public.

Some initial points:

What is a Lasting Power of Attorney?

A Lasting Power of Attorney (LPA) is a useful tool when people become incapable of running their own financial affairs. An LPA allows someone, of the donor’s choice, to step in and take control of the donor’s finances. Because of the great power the LPA gives them, attorneys are often trusted friends or family of the donor. However, where attorneys abuse this power, measures must be taken to protect the donor. This is particularly important when the donor cannot protect themselves or even complain about the way their attorney is acting.

Adults aged 18 or over with the capacity to make decisions can make provision for the event that sometime in the future they may lack capacity to make certain decisions.

This can be done by giving another person Lasting Power of Attorney (LPA) - the authority to act on their behalf or by making advance decisions to refuse medical treatment.

People given formal powers under LPA to make decisions on behalf of adults who lack capacity are bound by the Mental Capacity Act and its Code of Practice. They have a statutory responsibility to act within the limits of the powers given to them always to act in the person's best interests. 

Adults who lack capacity and do not have such formal arrangements and require significant decisions to be made may be subject to a best interest meeting or the issue may need to be taken to the Court of Protection.

The court may appoint a Deputy to act as decision maker or make a declaration about what is in the person's best interests.

What Kinds of Lasting Powers of Attorney Are There?

There are two types of LPA: personal welfare and property and affairs. LPAs are legal documents and are only valid if completed on the statutory form LPAs must be signed by the donor LPAs should normally name people who should be informed when it is to be registered LPAs must contain a certificate completed by an independent third party LPAs must name the person (or persons) who is to act as attorney LPAs must be registered with Office of Public Guardian (OPG) before they can be used If registered some time ago and not used, the attorney should inform the OPG when they start to act under it LPAs may have restrictions or conditions.

There are some decisions that can never be delegated to an attorney Attorneys should never be a professional/paid carer who is or is likely to be involved in the adults’ care or treatment - the only possible exception being that they are a close relative Attorneys can only make decisions prescribed in LPA, and must carry out the donor's instructions, i.e. they cannot assume decision-making for any other matters They may be consulted, if appropriate, over other matters unless there are explicit instructions not to Property and affairs attorneys should keep accounts. An LPA regarding finance would be immediately effective unless the person specified at the time that this should not occur until they have lost capacity to make decisions in this area.

What Happens If I do not do Lasting Power of Attorney and Lose Mental Capacity?

If you lose mental capacity your loved ones may have to go to the Court of Protection and get a Deputyship order to deal with your financial affairs. This can be expensive and the Court can impose constraints. Not recommended. The Court of Protection is the specialist court for all issues relating to people who lack capacity to make specific decisions. The Court can make decisions and appoint deputies to make decisions about someone’s property and financial affairs or their healthcare and personal welfare.

Under the Mental Capacity Act, the Court has the power to:

•              make decisions about the personal welfare or property and financial affairs of people who lack the capacity to make such decisions themselves.

•              make declarations about a person’s capacity to make a deci-sion, if the matter of whether they can make a decision cannot be resolved informally

•              make decisions in relation to serious medical treatment cases, which relate to providing, withdrawing or withholding treatment to a person who lacks capacity.

•              appoint a Deputy to make ongoing decisions on behalf of a person who lacks capacity, in relation to either the person’s personal welfare or property and financial affairs; and

•              make decisions about a Lasting Power of Attorney or Enduring Power of Attorney, including whether the power is valid, objections to registration, the scope of Attorney powers and the removal of Attorney powers.

The Court of Protection also has the power to:

•              decide whether a person has capacity to decide for themselves

•              make declarations, decisions or orders affecting people who lack capacity to make decisions

•              appoint deputies to make decisions for people who lack capacity

•              decide the validity of LPAs and remove deputies or attorneys who fail to carry out their duties appropriately.

The court can appoint deputies who are adults (8+ years who manage either the person lacking capacity's property and affairs or welfare decisions. A deputy could be a family member or a professional (though not a paid carer directly involved in the care or treatment of the person) The scope and limits of a deputy's authority will be clearly determined in the order of appointment Deputies must act in accordance with all the act's statutory principles, especially best interests and have regard to the code of practice.

What Are the Deputyship Fees?

You must pay a fee to apply to be a deputy. You must also pay a supervision fee every year after you’ve been appointed.

When you apply You must pay a £371 application fee. Send this with your application form. You need to pay the application fee twice if you’re applying to become both types of deputy.

You will also need to pay £494  if the court decides your case needs a hearing.

After you’ve been appointed You must pay an annual supervision fee depending on what lev-el of supervision your deputyship needs. You’ll pay: £320 for general supervision £35 for minimal supervision (if you’re a property and affairs deputy managing less than £21,000) Your annual supervision fee is due on 31 March for the previous year. You’ll also need to pay a £100 assessment fee if you’re a new deputy.

What is The Office of the Public Guardian?

The Public Guardian is responsible under the Mental Capacity Act for:

•              supervising deputies appointed by the Court of Protection.

•              keeping registers of deputies, Lasting Powers of Attorney, and Enduring Powers of Attorney; and

•              investigating any complaints about attorneys or deputies.

What is the Main Weakness of the Lasting Power of Attorney Process?

The main weakness is that it is very difficult to scrutinise the process while someone is alive and any wrongdoing often only comes to light after the Deceased has passed.  The Office of Public Guardian will not get involved post someone dying removing one possible method of scrutiny. The appeal of a Lasting Power of Attorney is that it avoids the possibility of a Deputyship order(a good thing). The downside is that if your Attorney abuses your trust, they may very get away with their financial gains if they are that way inclined. It requires very effective opposition after the event to remedy this. Thus by all means do a Lasting Power of Attorney but please make a good choice in selection of your attorney(s).